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The Kansas City Royals Model

I was twiddling over the numbers of the guys that we have been signing, and wondered if they are really worth it, in a business model sense.

Do you think these guys really will return 100M+ on their contract investment? Or should the Pacers take on the KC Royals position, where their payroll is far below everyone else? The team would be awful, but it would be profitable.

As a fan, you obviously want to see the team try to win a championship, but at this point, with how the NBA is structured, I really, honestly do not see us having a chance at a title. Boston started this three headed monster thing, and every big market team has tried to duplicate that.

So is being a 3rd-5th seed in the playoffs with 2nd, maybe Conf Finals exits enough? Is it enough to fill the seats, and keep them filled? And keep them filled enough to sell enough drinks and t-shirts to make a profit? Or would it make more sense business wise to dump salary and become profitable, keeping the team in the city?

Re: The Kansas City Royals Model

Indiana was last in the league in attendance last year due to past bad years. If the fans see you not trying to win, sign free agents and tank they won't buy tickets.

It would be bad if we don't raise more revenue than the league minimum for salary.

Basic economics says you need to invest a resource, time, capital or entrepreneurship to get something back. I am not sure why it would be different here.

This is the point. The team is already last in attendance, so why should they go out and throw more good money after bad? Do you think bringing back Hill and Hibbert will sell 80M worth of tickets over the next few years?

Re: The Kansas City Royals Model

This is the point. The team is already last in attendance, so why should they go out and throw more good money after bad? Do you think bringing back Hill and Hibbert will sell 80M worth of tickets over the next few years?

No, but they have other revenue streams too. It is the price of being in business.......

Re: The Kansas City Royals Model

This is the point. The team is already last in attendance, so why should they go out and throw more good money after bad? Do you think bringing back Hill and Hibbert will sell 80M worth of tickets over the next few years?

Yes, I think they will bring that much revenue.

If the franchise is resigned to not spending you might as well pack the bags and get out.

Re: The Kansas City Royals Model

This is the point. The team is already last in attendance, so why should they go out and throw more good money after bad? Do you think bringing back Hill and Hibbert will sell 80M worth of tickets over the next few years?

The Pacers are aiming towards consistency. This is why they brought back the starting 5 and tweaked the bench. If the team will produce the next few years like they did last year, the fans will come back. The team cannot have 1 good year after several disasterous ones and expect the fans to return. Now that they see continuity, I am guessing more fans will come out next year and so on.

Re: The Kansas City Royals Model

I'd bet that most professional sports owners got wealthy from other business means besides owning their professional teams. That being said, I think the mindset of being an owner should be more about putting a quality product on the playing field and bringing a city and its fanbase together. For instance, the Simons already have their mall and real estate conglomerate to make the big $$$. While making money owning the Pacers is one of their goals I'm sure, it should not be the end-all-be. Certainly not at the expense of putting a quality team on the playing field like this supposed "Royals model".

Re: The Kansas City Royals Model

I think it is a valid question. I think most teams' front offices discussed it at one point or another.
And the Clippers pretty much lived by that principle for decades.

But it's not 2002 anymore. Now there are strict minimum payroll rules. So that strategy seems obsolete.

The minimum payroll is at ~46 mil right now. And it should be pushed up to ~ 55 mil in a couple years.
While we are merely spending ~65 mil on salaries right now.

So, would cutting 10-15 mil in salary expenses make up for a considerably worse performance?
Not likely.

Right now, we have 0.600 record and the playoffs. Cut to 10-15 mil (e.g. Granger, or Hibbert, or West, or replace the bench with NBDL guys). And we are likely back to 35-40 wins.

You'd be losing regular season ticket revenue / concessions income.
Merchandise sales will take a hit.
Extra playoff revenue (which is at least 1 mil per playoff home game for us, being on the safe side here; and we had 6 of them this year).
Combine all that, and it's very unlikely that you'd be saving this way.

Now.... if you could cut salary by 250-300% compared to the other teams, like the Clippers used to do, then it may be possible to actually get profitable this way.
Tank, get high draft picks, advertise them, get everyone excited, sell some tickets, mess it up, repeat.
But those days are gone.

Re: The Kansas City Royals Model

do people realize how bad the KC Royals owner is? By far one of the worst owner in sports David Glass is a joke(he is Donald Sterling bad those 2 are terrible owners). That team wont win a thing until he sells the team really a shame for a good baseball town.

But comparing baseball and basketball is hard to do. One has no real salary cap the other does. Plus the minor league spending and what not really hard to compare the 2 sports.

Re: The Kansas City Royals Model

FWIW, the big difference between the Royals and the Pacers is the league they play in. The Royals play baseball. The Pacers play basketball. Baseball has no real salary cap. The Yankees can spend more money than God without much penalty. The Knicks would soon be paying more money in tax than salary if they spend the money the Yankees do. That sets a pretty high bar for the Royals. The bar is much less high for the Pacers.

Re: The Kansas City Royals Model

There is a critical difference between the Royals situation and the Pacers. MLB has revenue sharing. If an MLB team is under a salary threshold, they get money from teams over a different threshold. This is a significant amount. The Royals are basically a real life version of The Producers. They don't keep payroll low because attendance is low. They keep payroll low because they make a bigger profit by gaming the system. There is an important difference there.

The Pacers couldn't do that in the past. This last season, for example, the max revenue sharing amount was something like $5.5 mil. Not enough to tank your payroll. However, starting in the 2013-2014 season, it will balloon up to around $14 mil. Now that is something to think about: bare minimum payroll, recoup with a half filled area/TV/Merch, and collect a $14 mil profit. Someone will do this. Maybe Sacramento or Charlotte.

However, the Hibbert/Hill contracts (and their respective lengths) indicate that the Pacers aren't interested in this. If the low attendance numbers don't improve over the next few years? Might be tempting. This isn't inconceivable.

Re: The Kansas City Royals Model

I finished Moneyball recently and have been considering trying to understand if the model would fit in the NBA at all. Moneyball is based on the idea that no single player in baseball affects the game so completely as to make it worth spending a large percentage of a team's resources on that single player. It is better to spend on a number of players who can each give you the most important parts of that original player's contribution - particularly players who are undervalued. Once player values rise you replace them with other undervalued players.

I believe this would NOT fit in the NBA for a couple of reasons:

1) A single player has a HUGE impact on the outcome of a basketball game. The current adjustment being made is to determine exactly HOW MUCH that single player impacts winning and losing, because you still need the role-players to fill in the inevitable gaps, but unlike baseball a high-impact player is almost essential (yes, exceptions exist, but they are really exceptions in the LEVEL of the impact player rather than the complete lack of one) to reach the championship tiers in the NBA.

2) The pool of players to select replacements from is far smaller in basketball. I have no real numbers to support it, but I would venture to say that a single MLB team's farm system has more players available than are available to the entire NBA in any given season, never mind the entire set of farm systems across all teams. Given this, finding that undervalued player who has played in a consistent fashion against consistent competition and compiled actual statistics for evaluation is extremely difficult in the NBA.

BillS

A bird in the hand is worth two in the bush.
Or throw in a first-round pick and flip it for a max-level point guard...

Re: The Kansas City Royals Model

Pro Basketball teams are a shiny toy for a rich businessman to play with and have a public face. Sure PS&E is a large entity, but no NBA owner would rely on it to pay the bills. NBA ownership is generally not a year-to-year favorable investment. The value of the franchise at least appreciates, though, historically so it is better for your heirs than buying a yacht as a status symbol or plaything.

The Simons have malls that keep their family dynasty churning. Lets just hope the Pacers are rewarding enough / fun enough for them to keep as a side diversion, and that like a yacht they keep it up, and slap on new coats of paint as often as possible.

The poster "pacertom" since this forum began (and before!). I changed my name here to "Slick Pinkham" in honor of the imaginary player That Bobby "Slick" Leonard picked late in the 1971 ABA draft (true story!)

Re: The Kansas City Royals Model

It is better to spend on a number of players who can each give you the most important parts of that original player's contribution - particularly players who are undervalued.

well, Houston has a dominant moneyball PF on their roster right now, only he's built of 10 or so people. But he has every possible PF skill and talent on both ends of the floor.
So hopefully we will see!

Re: The Kansas City Royals Model

Houston is a team that believes it has a market efficiency. They won't say publically what stats they are using. They have overachieved several years in a row, so maybe it is working.

David Morway has been said to be a big believer in advanced metrics. The Pacers tend to gravitate towards players who are good defenders and good jump shooters (traits that don't tend to earn big paychecks, a la Robert Horry or Bruce Bowen), while shying away from people who can play iso offense or get to the rim (traits that tend to be overated and overpaid, a la Ricky Davis and Starbury).

I disagree with the notion that a Moneyball-esque strategy makes teams shy away from a huge contract with one player. It is about re-thinking talent evaluation and finding efficiencies. If you discover that defense and rebounding are far more important that iso scoring, you are still willing to break the bank on Dwight Howard, but you know would not be willing to break the bank for Carmello Anthony. If one player is head and shoulders above the others in the areas you find are most valuable, and you can swing it, you get him. This is an area where the term "Moneyball" does a disservice to the concept of objective analysis.

Here is an article from Grantland written by the Houston Rockets FO about the concept:

Re: The Kansas City Royals Model

I disagree with the notion that a Moneyball-esque strategy makes teams shy away from a huge contract with one player. It is about re-thinking talent evaluation and finding efficiencies. If you discover that defense and rebounding are far more important that iso scoring, you are still willing to break the bank on Dwight Howard, but you know would not be willing to break the bank for Carmello Anthony. If one player is head and shoulders above the others in the areas you find are most valuable, and you can swing it, you get him. This is an area where the term "Moneyball" does a disservice to the concept of objective analysis.

To be fair, that is because of a fundamental difference between MLB and the NBA, which is the cap. The $$$ aspect of Moneyball is because a small-revenue team simply can't come close to competing with the big boys for those head and shoulders players. Rather than trying, it is more efficient to find a replacement.

In the NBA you may be right, but I think it is more because of the impact that head and shoulders player makes being harder to replace - both due to the skills involved AND due to the way a single player with skills works on the floor vs. multiple players who combine to have a similar level of impact. The latter requires additional capabilities in teamwork and coaching in the NBA that aren't in play in baseball.

BillS

A bird in the hand is worth two in the bush.
Or throw in a first-round pick and flip it for a max-level point guard...